The long tale of 2014

Welcome to This Year Next Year Interaction 2015 (you may download the PDF file of the FULL introduction here ( https://bit.ly/1swP4v0 ), our annual collection of observations and speculations on the short- and medium-term changes in the topography of digital marketing.

The first of these reports was published in 2007 at a time when the online advertising market was easily delineated as search (the first programmatic medium) and display. There was no market to speak of in social media, online video or mobile. Times have changed. Social media has become the dominant internet behavior in terms of time spent online. In the USA in the first quarter of 2014 Freewheel (Comcast NBCU), estimates that fully 20% of all video is consumed on mobile devices; that is a big change from zero.

2007 was also the high-water mark of the PC age and the hopes for PC broadband penetration. In 2007, 'smartphone' and 'BlackBerry' were synonymous; there was no ‘app’ for anything; a tablet was something commandments came on; the term web 2.0 had yet to be coined; and Facebook was yet to send an invoice. The market was nearly recovered from the dot com implosion, and the financial calamity of 2008 was on no-one’s horizon. Even if it had been, few would have predicted it would catalyze today's smartphone- and app- dominated internet economy. We covered many of these macro events in Interaction 2014, the year that marked the 25th anniversary of the conception of the World Wide Web.

Much of the commentary we offered then remains true today. Google’s thirst for innovation and revenue has continued, Facebook is the undisputed number-two revenue generator and number-one acquirer, Twitter teeters on the edge of matching penetration and revenue with its utility and celebrity. From an advertiser perspective Microsoft and Yahoo continue to meander, certainly as evidenced by their revenue growth, unlike the relentless Amazon. In the device sector; Apple has reclaimed its place as the world’s most valuable enterprise, and for the first time since the passing of Steve Jobs there seems to be genuine optimism about its product pipeline with the exceptional sales of the 6 series of iPhones more than offsetting the slowing growth of tablet penetration. The impact of Apple Pay is yet to be evaluated. Samsung has wobbled but not fallen, and Xiaomi has made the 'US$50 android' a reality. Microsoft’s acquisition of Nokia and its integration of both Windows Mobile and Android with its devices are making some inroads into the market share of IOS and Android. X Box One has cemented Microsoft’s leadership in console gaming but has yet to translate into broad control of the living room. The recent acquisition of Mojang (Minecraft) is of unknown consequence.

The disruption of markets started with books, music, classified advertising and travel and continues, notably, in seemingly prosaic sectors like taxis, ride-sharing and short-term accommodation. In all cases the disruptor is ‘capital light’ relative to the disrupted. Legacy rules of markets and often legacy laws that support them are under siege. It’s notable that the new head of policy and communications for Uber, David Plough, is widely recognized as the architect of the acclaimed Obama social media campaign of 2008.

2014 was a big year in the corporate world. Facebook’s purchases of WhatsApp and Oculus VR (virtual reality) and Amazon’s acquisition of Twitch (streaming video) are discussed later. Facebook also acquired LiveRail to target users with video advertising across the internet and not just on its own site by combining user data mined on Facebook with LiveRail's own data. Facebook also launched Audience Network, a mobile ad network which allows marketers to advertise in mobile apps which will be complemented by LiveRail's video capabilities. All Facebook’s activities are likely to be even more synchronized as they complete the resurrection of the Atlas ad management platform it bought from Microsoft in 2013. Yahoo’s acquisition of BrightRoll means that it, alongside AOL vis AdadTV and Facebook are creating meaningful competition for YouTube.

In the early part of the year Google acquired Nest, giving the company an installed base of intelligent in-home devices; Boston Dynamics, giving it a stake in robotics beyond autonomous vehicles; DeepMind to increase its capabilities in machine learning and artificial intelligence; SkyBox Imaging to speed up and increase the intelligence of its mapping suite; and Range Span to give it a greater foothold in retailer intelligence and planning.

Twitter’s acquisitions focused on regaining control of its data 'fire hose' by buying its long-standing data partner Gnip; the development of scalable native advertising via Namo; expanding its e-commerce offer through CardSpring; and MoPub to power off-platform targeting using Twitter data.

The newly-listed Alibaba made multiple purchases to enhance its mapping and logistics including ChinaVision and AutoNavi. It also purchased UCWeb, the dominant Android web browser in China, to learn more about how people use apps and the mobile web, and the data these produce. Alibaba is increasingly hard to characterize as ‘the Amazon of China’.

Other notable transactions have included Apple’s purchase of Beats to increase its control of the hardware ecosystem and to enter media streaming. Time Inc. was spun off from Time Warner, and News Corp split itself into video and non-video assets. Disney bought YouTube multi-channel network Maker Studios. In July 2014 BSkyB took control of Sky in Germany and Italy.

Vodafone divested its stake in Verizon and extended its cable interests in Germany and Spain with the purchase of Kabel and Ono. In the pipeline are the Comcast NBCU acquisition of Time Warner Cable and AT&T’s bid for DirecTV.
The marketing clouds continue to gather with SalesForce, Oracle, Adobe and others building suites of assets that collect and apply data in the pursuit of marketing automation.

At the heart of almost all these transactions is a desire to capture as many digital touch points, and passive and active customer interactions, to increase the volume and value of data and monetize it through advertising, subscription and product sales.

Finally, 2014, has also been the first year of a serious attempt to monetize the ‘image graph’. Instagram, having surpassed 300m users and Pinterest, two totally different services united by the virality of sharing images continue to grow their reach at a remarkable pace. Pinterest has become an enormous source of traffic for both publishers and e-commerce platforms and now it’s time to test its US$5bn valuation against its potential to translate influence into revenue. The portents are good. Pinterest has a devoted and growing user base, and the ability to link any pinned image to its point of origin, often somewhere it can be purchased, so makes a valuable direct connection from scrap book to check book.

It is safe to assume there is much more to come.

As ever this is not an attempt at an audit of the year in digital but an attempt to illuminate areas of current and near-future importance to the world’s largest advertisers. Indeed, this edition has a narrower focus than usual, so some of it will be highly relevant to some readers and less so to others. We focus on four themes:

1. In the world of internet advertising the “words of the year” have been ‘programmatic’ ‘native’ and ‘messenger’; the first represents a truly significant change in the nature of advertising and marketing with data and technology as the catalyst of that change. The second is a continuation of the effort of many years to bring advertising and content closer to overcome increased ad avoidance or ad blindness in a world where attention is every bit as fragmented as channel choice. The third, which has become more pervasive more quickly than any technology service in history, will affect marketing (narrowly) and communications (broadly) in the coming years.
2. E-commerce, omni-channel marketing and in store technology have moved from the periphery to become central to retailers and brand owners across categories from detergent to automotive.
3. We examine the current state of the internet in terms of the geographic distribution of connectivity, the speed at which that connectivity delivers services and content and just how far it has to go. The word 'ecosystem' is overused. People in the most advanced markets sometimes think their ecosystem is typical. It is not.
4. We also look ahead generationally at the behavior of millennials and post-millennials and also at some of the audience distribution characteristics of the media they favor most.

2014 has also been the year of ‘the internet of things’; of wearables; and the less-discussed industrial internet (which GE describes at ge.com better than we ever could). These have been widely surveyed elsewhere but we note that within five years people will reflect on 2014’s idea of big data and say 'they really had no idea'.

Thanks as ever to GroupM Futures Director Adam Smith and to the GroupM family around the world.

@robnorman